Lithium miners hunt for capital as demand for metal climbs

Rod Nickel

3 Min Read

TORONTO (Reuters) - Climbing demand for the metal lithium at a time of broader commodity weakness has Canada’s Nemaska Lithium Inc and Western Lithium USA Corp confident they can soon obtain scarce capital even as other junior miners struggle.

An aerial view of the brine pools and processing plant of the Soquimich (SQM) lithium mine on the Atacama salt flat, the world's second largest salt flat and the largest lithium deposit currently in production, with over a quarter of the world's known reserves, in the Atacama desert of northern Chile, in this January 10, 2013 file photo. REUTERS/Ivan Alvarado Files

A scramble to secure lithium has accelerated as prices have risen, driven by demand for smartphone, laptop and electric car batteries.

“Everyone can see the writing on the wall as we move toward 2020, and a need for new deposits to get into production,” said Jon Hykawy, president of consultancy Stormcrow Capital. “Problem is, the capital really isn’t there.”

But Western, which aims to bring the world’s next new lithium resource into production in 2018 in Argentina, is optimistic.

“What we’re really seeing is the equivalent of another industrial revolution, the switch to electric power for automobiles,” Chief Executive Officer Tom Hodgson said at the Prospectors & Developers Association of Canada (PDAC) convention in Toronto. “Given the fundamental shift in energy demand, nothing’s easy, but (raising capital is) very doable.”

Vancouver-based Western’s $314 million project would pump brine to the surface for evaporation.

Western says one of its advantages is a commercial agreement it is negotiating with South Korean steelmaker Posco, a potential joint venture that would deliver Western’s lithium to the doorstep of South Korean battery manufacturers LG Electronics Inc and Samsung SDI.

Nemaska Lithium Inc, developing a mine in the Canadian province of Quebec, expects to raise the C$521 million ($392.14 million) it needs within a year, Chief Executive Officer Guy Bourassa said, adding it has one of only three undeveloped projects in the world with full permits.

Since lithium does not trade publicly, many investors, burned by other faltering commodities, do not realize that prices have steadily climbed, Bourassa said.

Three large producers, SQM, Albemarle Corp and FMC Corp, and a new Argentina brine operation owned by Orocobre Ltd account for just over half of global production, according to advisory firm Global Lithium LLC.

“End users we’re talking with obviously don’t like that situation because they’re at the mercy of these four guys,” Bourassa said. “It’s another advantage for us.”

Lithium carbonate prices are poised to keep rising in 2016, and demand will require a new large-scale plant every 18 months for the next decade, Global Lithium president Joe Lowry said.

Western Lithium’s shares have gained about 11 percent this year, as of Friday, while Nemaska has climbed 9 percent.